How to Stake Cardano (ADA)
Cardano was developed by Charles Hoskinson, one of the co-founders of Ethereum in 2015. It is a smart contract building platform where one can build decentralised apps or dApps. ADA is the native token of Cardano.
How is Cardano different from Etherem? Cardano is powered by a Proof of Stake (PoS) mechanism, while Ethereum follow the Proof of Work (PoW) mechanism.
With Cardano (ADA), it is a Proof of Stake (PoS) cryptocurrency where mining is not at all used. Blockchain transactions are validated by “epoch slot leaders.”
Now let us learn about staking.
What is Cardano (ADA) staking?
Staking is a process to lock your tokens for a specific period of time and get more tokens as rewards.
Since ADA works on Proof of Stake mechanism to verify the transactions, staking of ADA plays a very important role.
There are stake pools that are chosen for the given period of five days, also known as epochs that Cardano utilizes and it is fueled by the community that has allocated their Cardano (ADA) to a staking pool.
Slot leaders are responsible for creating new Cardano blocks and validating them. As a reward for performing this work, the pool is rewarded with ADA coins that are in turn, distributed to their stake pool members.
Staking ADA refers to locking your ADA tokens though various means and getting more ADA tokens as rewards. Think of it as a FIXED deposit.
Who should stake ADA?
Anyone who believes in Cardano ecosystem and do not wish to trade their ADA and plans to hold it for a long term, can stake ADA. Staking ADA tokens would allow them to earn interest.
Now let us see how you can stake ADA to learn interest.
How to stake ADA tokens?
There are mainly 3 ways to stake ADA tokens:
- Staking on CEFI exchanges
- Staking through a wallet
- Lending through a CEFI/DEFI platform.
How to stake ADA tokens through wallets?
Now let us have a look at how to stake ADA through wallet step by step:
Step 1: Buy ADA Tokens
Purchase ADA tokens from a suitable crypto exchange such as Coinbase or Binance. Register for a new account if you do not have an account with a crypto exchange. Provide the basic details, confirm your contact details and complete the KYC procedure. After which, proceed to buy a sufficient amount of ADA tokens that you wish to stake.
Step 2: Choose a staking wallet
Popular staking wallets that support Cardano (ADA) staking are:
- Daedalus Wallet (Desktop) : It is a full node wallet with Hardware Wallet Integration.
- Yoroi Wallet (Browser extension, Mobile)
- AdaLite (Web Wallet)
- Ledger Nano S (Hardware wallet)
Now that we know the wallet, let us send the purchased ADA to the respective wallet.
Step 3: Transfer the ADA tokens to the wallet
Transfer the purchased ADA tokens. Make note of the wallet address, an incorrect entry of the wallet address can result in a huge loss of funds.
It is recommended to initially execute a small deposit ( around 10 ADA), to ensure that the transfer can be completed successfully without any issues, and then complete a second transfer to move the remaining tokens.
To transfer the tokens to the wallet, make sure that you have access to :
- The withdrawal page on the exchange for the ADA tokens that you hold.
- The Deposit or Receiving Address of your chosen staking wallet.
Step 4: Choose a Cardano staking pool for delegation
Once you have a sufficient balance in the wallet, navigate to the Delegation List tab. From the Delegation List tab, you will be allowed to use the search bar for searching up specific Stake Pools or you can choose to arrange them with the “sort by” option. A Score sorting feature is offered which provides a list of Stake Pools with open Pledge space as well as low to high costs.
Once you decide on which Stake Pool you wish to choose, tap on the “DELEGATE” option visible on the right side, just next to that pool. After which a prompt will appear on the screen. Make note of how the fixed fees is viewed and is deducted from the total amount.
Enter your wallet password, which you set earlier. Note the wallet password is nether the wallet’s private keys nor the seed phrase. Confirm the transaction and click on “Delegate” again.
How to choose a staking pool for ADA?
Cardano Staking Pools levy a Fixed Cost (ADA fee) on initial delegations, paired with a Margin (a percentage of the fee) on the staking rewards. Greater the pledge of a stake pool, higher are the rewards generated.
The highest reward scenario occurs only if the staking pool can maintain a total balance of 1/500 of the total eligible ADA tokens being staked, this is known as Engaged Balance. Anything lesser than 1/500th of this balance in the Stake Pool means that delegators will receive less rewards.
The number of desired validators is usually five hundred, and this represents a parameter known as “k.”
Obtaining information regarding the desired number of validators and optimal balances provides a view of how the Cardano network is trying to balance out the number of validators by outlining this optimal network condition.
For further details on Cardano Stake Pools please visit the Cardano Staking Rewards Asset Profile.
Step 5: Have a look at your dashboard
Visit the dashboard again and once the transaction has been confirmed, the user can view their total delegated balance. Users can also view any statistics regarding the upcoming and pending rewards.The delegated staking pool can be reviewed as well.
When the user withdraws their rewards, they have the option to de-register the staking key. Choosing to keep the staking key will allow the user to withdraw the rewards and continue delegating to the same staking pool.
De-registering the staking key will give the user their deposit back to them and remove the delegation of the key from any pool, this is how users can “un-delegate” your stake.
How does delegation of ADA work?
Delegation is provided by using the Ouroboros protocol that Cardano employs. Cardano is most likely the most secure, Proof of Stake (PoS) blockchain protocol and this protocol is designed to protect the user’s ADA from any access by a stake pool operator or a member.
The user’s delegation translates into a vote for a particular stake pool, that they choose to work with on their behalf to contribute to the blockchain and earn staking rewards in the form of ADA. When the user chooses to delegate their stake, their ADA is neither taken out of their wallet not is it tied up or locked, while it is being delegated. Users are allowed trade it, sell it, spend it, or re-delegate it at any point in time.
Prior to staking ADA, it is essential to know which staking pool and staking wallet to choose.
Where to stake ADA? Top 5 platforms for staking ADA
Staking Cardano was first introduced on Binance in February 2021. The estimated staking rewards is 7.79% APY, when the tokens are locked-in for a fixed duration of 60 days on the exchange. The program functions on a first-come, first-serve basis and the crypto interest is out on a daily basis. Cardano investors can chooseto lock in the tokens for 60 day, 30 days or a flexible option to remain liquid as well as trade the coins on the Binance Exchange.
The flexible rate for staking Cardano on Binance is only 0.48% APY, however Binance is a suitable option for investors or traders who are seeking short term rewards, and hold the asset simultaneously on the trading platform. A minimum of 1 ADA token is required to begin staking on Binance, with up to a maximum limit of 500,000 ADA tokens for staking.
The advantage of staking ADA tokens on Binance is the accessibility offered for the platform’s other features, products and services, that does not require transferring the coins to another wallet address.
Benefits for choosing Binance as a platform for staking Cardano is the attractive staking rates, the flexible rate, the lock-in options and the capability to maximize the ADA staking rewards by utilizing other financial products and services available on Binance.
Kraken is another globally popular crypto exchange that allows staking Cardano.
On Kraken, there are no waiting periods or fixed terms for staking. Kraken’s estimated staking incentive for Cardano ranges from 4% to 6% APY. The return on investment for staking Cardano on Kraken is very generous under a flexible arrangement, when compared to other exchanges such as Binance or KuCoin.
ADA staking rewards are paid out on a weekly basis, these rewards can either be withdrawn or transferred from the Kraken staking wallet to the spot wallet to trade for other coins.
A selling point of Kraken for staking Cardano is that there is no lock-in contracts and investors can easily earn one of the best staking returns for ADA without a lock-in duration.
Crypto.com supports a vast list including 30 different coins that can be staked on the platform, including ADA tokens to generate a passive income of 3% on a yearly basis.
Crypto.com users on the mobile app can deposit as well as unlock the higher staking reward of 3% P.A for staking Cardano, for a fixed duration of 3 months. Investors can earn 2% for locking up their ADA tokens on the app, for one month or choose flexible staking to earn 0.5% per year.
The staking rewards on Crypto.com are not as high, when compared to other exchanges. However, the staking bonuses can be increased to 5% for a fixed 3 month period by holding a total of 500,000 CRO tokens in a wallet.
Investors that are using the KuCoin digital currency exchange can access Pool-X for staking coins, to generate relatively stable profits. KuCoin offers flexible staking for the Cardano network with an estimated return of 1.5% per annum.
When compared to Binance that offers a yield of 0.48% under a flexible term, staking Cardano on KuCoin generates a greater return on investment.
KuCoin is suitable for investors who wish to earn passive income via staking, in between trading. A disadvantage of using KuCoin for staking ADA is the lack of fixed term options for locking in the ADA tokens, either for 30 or 60 day periods is unavailable, this results in earning higher returns.
CEX.io: Best Platform to stake ADA
The CEX.IO staking platform allows users to raise their holdings by staking coins such as Cardano on a CEX.IO account and earn passive income. Once the ADA tokens are purchased or transferred to the exchange for staking, the rewards are automatically added to the user’s wallet balance.
CEX.IO offers an estimated staking reward of 2.6% annually, which can be withdrawn by the investor at any given time. There are no lock-in periods that allows the users’ to trade the coins on the exchange.
The staking rewards for ADA are calculated every hour and is sent to the user’s account, once a month. This is a demerit as several other staking platforms including Binance, offer pay outs on a daily basis and the rewards can be used for trading or transferred to a personal hardware wallet as well.
Rewards for staking ADA
To obtain staking rewards, users are required to delegate their ADA holdings to any of the authorized Cardano stake pools, that are available in their wallet’s delegation center.
As a reward for delegating their ADA, participants involved in staking Cardano ADA are eligible to earn a source for passive income, in the form of additional ADA, when their delegated pool validates a block. The ADA Cardano staking model allows everyone who holds ADA as part of their crypto portfolio to contribute and at the same time benefit from it.
Users are not required to claim their Cardano staking rewards as they are automatically distributed, accordingly. Rewards are earned at the end of every epoch, the user’s balance might take around 5 days to be updated. Note that, there will be an initial delay, until they begin to notice the rewards to appear.
The process of staking Cardano is relatively easy. The attractive low fees on Cardano paired with the fast paced confirmation times make this process, enjoyable thoroughly. It is integral to be aware of the epoch time frames to estimate when you can expect to receive, your upcoming staking reward.
The platforms mentioned above are suitable for crypto investors of all levels. They are easy to use as well as access.
Storing the ADA tokens in hardware wallets for added security and control is highly recommended.
Is staking ADA safe?
Staking Cardano is considered to be moderately safe with absolutely no or very little risk of losing ADA tokens, but make sure you are using a reputable wallet. However, if the exchange gets hacked or shuts down, you may lose your ADA tokens.
The Cardano wallet can be split into two separate addresses one for spending and the other for staking. ADA coins that are delegated to the staking address must remain in the wallet to earn staking rewards and thus stays in the owner’s control at all times.